The cost of operating the Matching Fund Special Purpose Securitization Corporation in its first years was about 30 percent higher than predicted.
The corporation, created in February 2022, was budgeted to operate on $584,000.
Nathan Simmonds, director of Finance and Administration at the Public Finance Authority, told the corporation’s board of directors Wednesday that was a “substantial underestimation.” The corporation spent $176,000 more than that and owed the PFA that amount.
The PFA is receiving the biggest chunk of the corporation’s money. The budget for 2024 lists the PFA receiving $154,500 for administration fees. That fee is to increase by 3 percent each year.
The second biggest payment is for auditing services for $90,000 and following that are accounting services for $60,000.
Although the budget was approved with no objection, concern was raised over the audit not being completed promptly. Simmonds said the accounting firm BDO was the only firm that responded when a request for proposals was advertised. He added that BDO is also doing audits of the government of the Virgin Islands, and it may be a question of resources for the firm to do all it has committed to doing.
Gov. Albert Bryan Jr., who chaired the meeting, said the corporation, which is meant to stabilize the Government Employees’ Retirement System, should work to attract more auditors’ bids next time.
Investment advisors are budgeted to get $60,000 next year, as are the calculation agents.
The board of directors is expected to need $55,000 to cover fees and expenses. Legal counsel will get $50,000 and bond counsel will get $30,000.
The Special Purpose Corporation is the tool the government is using to keep the Government Employees’ Retirement System solvent.
Bryan wrote when advocating its creation, “Refinancing and reducing debt through the creation of a securitization corporation (also called a special purpose vehicle) is a globally accepted strategy used by municipalities for saving large amounts of money on existing debts and accessing that money to benefit citizens.“
He added, “The simple truth is that securitization is a strategy that not only saves us money over time but gives us working capital and credibility that makes it easier to seek larger financing to save the GERS.”
Board members present at the meeting were Bryan, Sheila Robinson, Pamela Gregorski, and Kristine Eppes. Board member Michelle Dryer was absent.
